Explainer: What Nigeria’s Green Tax means for car buyers, dealers

For buyers currently seeking to purchase a car in Nigeria, whether brand new, tokunbo, or even an electric vehicle, the new Green Tax could affect how much you pay.

The new policy, which took effect on July 1 under the 2026 Fiscal Policy Measures, introduces an environmental surcharge on some imported cars while reducing import levies on others to discourage high-emission vehicles that contribute to air pollution and to encourage cleaner transportation in the country, in line with global standards.

The Green Tax is rooted in policy discussions that prompted its 2026 rollout, and one major foundation was the Nigeria Energy Transition Plan, launched in 2022, which sets a roadmap for reducing emissions across sectors, including transportation, and increasing the adoption of cleaner vehicles as part of the country’s journey to net-zero emissions by 2060.

This policy also draws from the Climate Change Act 2021, which established the legal framework for climate action in Nigeria, and from the country’s commitments under the Paris Agreement, an international deal aimed at tackling climate change, which entered into force in 2017 to reduce greenhouse gas emissions.

Read also: Nigeria halves Customs duties on vehicle imports ahead of new green tax surcharge

With the policy, Nigeria has joined a growing list of countries adopting fiscal measures aimed at reducing environmental pollution and encouraging sustainable business practices.

What is a Green Tax?

A Green Tax, also known as an environmental tax, is a levy imposed on products, processes, or activities that harm the environment, with a primary goal to discourage polluting behaviors and promote sustainability by making environmentally damaging choices more expensive while encouraging cleaner alternatives.

Other African countries are currently implementing or enforcing a form of green taxation, including South Africa, leading with its carbon tax, Ghana implementing the emission levy, and Kenya, which has also implemented proposals on carbon-based vehicle taxation.

In Europe, 38 OECD (Organisation for Economic Co-operation and Development) countries have all introduced the green tax.

Several other nations across the continent are advancing toward implementation, with Morocco, Rwanda, and Egypt actively developing and adopting green tax strategies and taxonomies.

What it means for car buyers, dealers

The new policy, which supports Nigeria’s climate commitments, including its target of achieving net-zero emissions by 2060, influences the kinds of vehicles Nigerians will import or buy.

Imported vehicles with an engine size of 2,000 cubic centimetres (cc) to 3,999cc (engines of 2.0 to 3.9 liters) are subject to a two percent levy, while vehicles with an engine size of 4,000cc and above are subject to a four percent levy.

To cushion the effect of this new tax, the government significantly slashed the standard import levies on brand-new cars from 20 percent to 10 percent and used vehicles from 15 percent to 5 percent.

“This policy excludes mass transit buses, electric vehicles (EVs), and locally manufactured vehicles from this green charge surcharge. The vehicles that are to pay are those that are above 2,000cc,” Abdulahi Maiwada, national public relations officer of the Service, told BusinessDay.

This means that buyers looking to purchase full-sized and luxury SUVs, including some models of the Toyota Land Cruiser, Volvo XC90, Mercedes-Benz GLE, heavy-duty pickups, Porsche 911 (3.0L – 3.8L), and the Honda Civic Type R, are likely to be affected by the new Green Tax.

Will car prices drop?

The price of vehicles dropping or rising for car buyers, dealers, and transport operators now depends on the vehicle type, engine capacity, customs duties, and other charges.

“Not all vehicles will become cheaper; exchange rates, shipping costs, clearing charges, dealer margins, and the newly introduced Green Tax on some larger engine vehicles will still influence final selling prices,” Ifechukwu Obodoechi, an automotive consultant, said.

Obodoechi said this policy has the potential to increase vehicle affordability, but buyers should avoid assuming every car will suddenly become a bargain.

“The smartest purchase will still come down to proper market research, vehicle inspection, and understanding the true cost of ownership,” he said.

Read also: Nigeria’s middle class wanted better cars. The naira had other plans

Importers of used cars in Nigeria also face a layered tariff structure that begins with a 20 percent Customs import duty on the Cost, Insurance and Freight (CIF) value, followed by a 7 percent surcharge computed on the duty.

That is followed by a 15 percent National Automotive Council levy, a 0.5 percent ECOWAS Trade Liberalisation Scheme levy for vehicles sourced within West Africa, and a 7.5 percent Value Added Tax.

Chioma Ohabazu, a tax enthusiast, said that one important thing to understand is that the vehicles currently sitting in dealerships were imported under the old duty structure.

Ohabazu noted that dealers already paid those higher import costs before these new changes were introduced, saying, “That means if you walk into a dealership today, expecting prices to drop overnight, you’re likely to be disappointed.”

What are stakeholders saying?

Stakeholders are worried that the policy may worsen inflation and increase the cost of vehicles, given that there are several other charges already on the imported vehicles.

The Association of Nigerian Licensed Customs Agents (ANLCA) called for an immediate suspension of the policy, citing inadequate stakeholder consultation and insufficient notice before implementation.

Emenike Nwokeoji, national President, ANLCA, in a statement, described the inclusion of cargo already in transit as a retrospective fiscal burden that could expose importers and customs agents to significant financial losses.

The association also raised concerns over the absence of clear guidelines for determining engine capacities for tax assessment, warning that the ambiguity could lead to inconsistent implementation and disputes during cargo clearance.

ANLCA urged the federal government to postpone the rollout, publish detailed implementation guidelines, and provide a transition period to enable businesses to adjust to the new regime.